Uber’s Search for New C.E.O. Hampered by Deep Split on Board

It looks like Uber’s search for a new CEO is not going so well, but the difficulty in finding a replacement (if that’s truly the case) for Travis looks to be more complicated than just “internal divisions.” Could Travis come back to Uber in some capacity? Is he engineering his re-hiring? In today’s round up, senior RSG contributor John Ince covers the hold up for finding a TK replacement, an article about Uber being “too expensive” for passengers, and Uber cars catching fire.

Uber’s Search for New C.E.O. Hampered by Deep Split on Board [New York Times]

Sum and Substance:SAN FRANCISCO — Some members of Uber’s eight-person board were excited about the idea of Meg Whitman becoming the ride-hailing company’s next chief executive. Ms. Whitman, the chief executive of Hewlett Packard Enterprise and a former leader of eBay, appeared to have many of the right traits for the job: experience, maturity, a level head — the kind of qualities that Travis Kalanick, the Uber co-founder who stepped down as chief executive last month, mostly lacked. She had even personally invested in the company in the past.

Over the past few weeks, Ms. Whitman met with several Uber board members individually, offering advice on how to address the company’s problems. The members were encouraged by the discussions, and some believed that she was a natural fit for the vacant chief executive role. And after weeks of searching for a top candidate, they were eager to try to win her over.

That group did not include Mr. Kalanick. He and several of his allies had a competing agenda that included their own preferred candidates for the top job and the possibility of returning Mr. Kalanick into an operational role, perhaps even as chief executive. His surrogates had also recently begun talks with the Japanese conglomerate SoftBank about an investment in Uber that could provide Mr. Kalanick a route to regaining power.

The jockeying between factions has put billions of dollars on the line, as the Uber board fights over control of the $70 billion ride-hailing giant. Interviews with more than a dozen people close to the process, who spoke on the condition of anonymity because the discussions are confidential, indicate that board members’ relationships have been damaged by leaks, shifting wildly as alliances are forged and then broken.

The backbiting has taken a toll. After it was reported that she was a candidate for the chief executive job, Ms. Whitman said last Thursday that “Uber’s C.E.O. will not be Meg Whitman.” She made her announcement in a series of messages on Twitter just as the Uber board was holding a quarterly meeting, at which they had planned to call a vote on whether to appoint her to the job. The internal divisions mean the search for a new leader may drag on. Even as board members speak with other candidates, including Jeffrey Immelt, who is departing as chief executive of General Electric, about the chief executive job, a lack of cohesion is apparent. Some board members are not convinced that Mr. Immelt is the right choice, given that G.E.’s stock price and profits have stagnated in recent years.

My Take: According to this New York Times piece, the recruitment of Meg Whitman as Uber’s CEO was more advanced than many of us knew. She had several conversations with key Uber board members, and the board was all but ready to vote on her appointment as Uber’s new CEO, when suddenly, she withdrew from consideration. So what happened to change her mind? Here’s a tantalizing theory that comes directly from one of our most astute readers and commentators. Recently, Scott Myers uncovered a piece of information that strikes right to the heart of Uber’s hype. Apparently Uber and Lyft have been pulling a fast one with their accounting of pool rides. This gets a little tricky so stay with me here.

On regular rides, both companies recognize as revenues just the agency commissions paid to them by drivers who use their apps, per the FT. However, on the growing category of carpool or shared rides (called uberPOOL and Lyft Line, respectively), Uber and Lyft claim to be the principals actually providing the service, and count as revenue the full fare paid. Since these shared rides actually are provided by non-employee drivers and non-company-owned cars, they will be reclassified under the new rules as agency transactions on which only commission revenue can be booked by Uber and Lyft. The impact on Uber is very large: its first quarter revenues would fall from $3.4 billion to $1.5 billion under the revised accounting standards, per the FT.

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In other words, almost overnight Uber’s strongest case for investors to stick with the company will be negated. With one new accounting regulation, Uber’s revenue growth rates are going to be slashed in half. Uber’s price/revenues numbers will look twice as bad. The chances that this missive from Scott Myers was actually read by Meg Whitman are small. The chances that it was decisive factor for her decision to withdraw from CEO consideration are even lower. But none of that diminishes the significance.

Uber Costs Too Much Because Drivers Trick the System. Here’s How to Fight Back [Inc.com]

Sum and Substance: Lord knows Uber’s been taking a beating — of its own making. The problems have played into the hands of rival Lyft, which is watching its business grow. But you know who else is paying a price? You are. A brand-new study finds that Uber drivers in the U.S. and U.K. work together to game the company’s algorithms. Many coordinate their use of Uber’s app to create a perceived driver shortage, setting off higher surge pricing so rides are more expensive for consumers. Other techniques leave the passengers untouched but cause Uber to pay more per ride than it otherwise would. … Uber responded with the following statement: “This behavior is neither widespread or permissible on the Uber platform, and we have technical safeguards in place to help prevent it from happening.”

Mareike Möhlmann and Ola Henfridsson of Warwick Business School in the U.K. and Lior Zalmanson of New York University interviewed drivers in New York City and London and analyzed 1,012 blogs on UberPeople.net, a site for Uber drivers. The researchers found that drivers organize mass “switch-offs,” or periods in which they log off the app. Uber software that oversees driver performance through the app that drivers have to use registers the condition as a sudden lack of available rides. The company then applies surge pricing as it does to manage a mismatch between supply and demand. As a result, you, the passenger, pay more and both Uber and the driver make more. Once surge pricing is in place, the drivers log back in and quickly make extra money. The researchers found that drivers coordinate when to log off, because it takes a certain number to trigger the perceived lack of drivers.

It’s complete manipulation, possibly stemming from the relatively low amounts of money many Uber drivers make. Or maybe it’s a reaction to how Uber reportedly psychologically manipulates drivers to its advantage. Drivers use other techniques that hit Uber rather than riders. For example, they will accept an UberPool ridesharing fare and then immediately log off or ignore other requests so they can go directly to a destination. They effectively get a larger amount from Uber for the trip. (According to the RideShareGuy.com site, multiple trips under UberPool often aren’t worth the extra work.) …

You, the passenger, have no direct control in any of this, particularly when it comes to surge pricing. But there is one thing you can do, which is take a basic smart consumer action and comparison shop. Find out if Lyft and other rideshare providers operate in your location. Download the apps and check who offers the best deal. (If a service turns out to be unreliable or an otherwise poor choice, you can always delete its app going forward.) There’s a reasonable chance someone else can get you where you need to go for less.

My Take: This is a misleading if not irresponsible article that extrapolates from comments on message boards to a completely unfounded conspiracy theory. Furthermore, the title of the article in is based upon the fallacy that “Uber Costs Too Much.” How can it cost too much when Uber is losing billions of dollars by undercutting taxis on prices and offering a valuable service at well below market rates?

Yes, now and then there are posts on driver message boards urging drivers to coordinate action on when to log off in an attempt to cause a surge. But the author of the article (and the researchers who did the study) are clearly out of touch with what is happening on the street. Had they dug in a little further, they would have learned that surges have greatly diminished recently. They also would have learned that coordination between drivers is notoriously bad, because it’s extremely difficult for drivers to communicate with each other while out on the road.

I suspect that if driver coordination was better, they probably would pile onto a strategy like this, but when this happens Uber usually detects it and nips it in the bud – as they indicated from their statement (included in an updated version of the article). As to the claim that drivers attempt to get out of multiple pickups on Pool and Lyft Line, probably some truth to that. What is your experience with strategies like this? Have you done this stuff? If so, does it work?

Sum and Substance: Uber has said it could have done more to pull unsafe cars off the road in Singapore, amid allegations it rented out faulty vehicles to drivers. The Wall Street Journal reported on Thursday that Uber was aware of a Honda Vezel recall when it purchased more than 1,000 Vezels that were then leased to drivers. One of these cars caught fire in January, according to the report. Honda recalled the Vezel model in April 2016 due to a faulty component that could cause overheating. According to the Wall Street Journal, Uber subsequently bought more than 1,000 of the models and leased them to drivers in Singapore through its affiliate car-leasing company, Lion City Rental. The leasing arrangement was designed to meet strong demand in the country where the cost of owning a vehicle is extremely high.

In January, one Uber driver had flames burst from the dashboard of his Vezel, causing damage to the interior and windshield, the report said. He was not injured. “As soon as we learned of a Honda Vezel from the Lion Cit Rental fleet catching fire, we took swift action to fix the problem,” Uber said in a statement to the BBC. It did not provide details of what action was taken. However, the firm said “we could have done more” to deal with the issue. Uber said it had responded to six vehicle recalls since the beginning of the year.

My Take: You really do have to wonder about the judgement of some of these Uber execs. What in the world were they thinking by scooping up 1000 Hondas with known defects – probably at a deep discount – then putting both drivers and passengers at risk? It’s the same kind of thinking that has plagued the company – let’s do this and if something bad happens, we’ll apologize for it later.

Readers, what do you think of this week’s round up? Do you think other drivers are manipulating surge? How do you think Uber’s search for a new CEO will play out?

John Ince is a former Fortune reporter and Wall Street banker. He has about 1,000 rides under his belt driving part time for Uber and Lyft. He’s writing a book about his experiences entitled: Travels With Vanessa: A Rideshare Driver Tries To Make Sense of It all - For a sneak peak visit the link above.

Yeah that “study” is clearly atrocious and its authors should never have put that out. My guess: it will never be published in a peer reviewed journal, making the reporting of it absolutely the equivalent of #FakeNews.

An UberX ride is charged $10, the driver is paid $3, Uber takes the rest in fees and commission.
Uber now marks down $7 as revenue. In the future, there will be no change.

A pool ride is charged $20, $10 for each of two riders, and the driver is paid $5.

Uber currently marks down $20 as revenue, then marks down $5 as expenses.
In the future Uber will mark down $15 as revenue.

We aren’t getting a raise from this change in GAAP, so I have to think that before and after, Uber marks down the same net revenue.

What am I missing?

random browser

Difference is that Uber will charge whatever they want to the passenger. Driver gets time and mileage only. It is no longer a percentage of passenger fare actually paid.

VHound

Meg Whitman would be a terrible choice for Uber CEO. The new accounting rules aside, Uber needs someone NOT entrenched in silicon valley – 1st Ebay and now Hewlett-Packer. I personally think the Kalanick part of the board said no way. They do not want a female General Patton.

Uber investors are the ones who are freaking out over the accounting changes. The desire for an IPO materializing soon is fading fast. The truth is, the board should not hire someone to take Uber public. It needs someone who can run a goddamn business. Someone who understands what and how a service company works and what changes need to be made to it successful. The current ‘race-to-the-bottom’ pricing model is simply insane. If they choose the wrong leader Uber may end up being the AOL of Ride Sharing.

As far as the second piece, I agree with you 100%. I tried organizing Uber drivers for about three months and gave up. It’s virtually impossible. There is no data base of drivers with contact info accessible. None that I could find anyway. And organizing enough drivers to log off simultaneously is basically impossible. As you mentioned, the current surge levels are not even a third of what they were 6 months ago. And I believe the reason for that is that Uber and Lyft have succeeded in bringing in so many new drivers (called ants) with their false promises that the balance of supply and demand has been destroyed. In LA, if you drive 7-9 am in the 1.5x 1.6 boost areas, you’re lucky to get more than two trips an hour.

The Uber pool and Lyft line actions mentioned also seem a tad wrong. On Uber, once you accept a pool ride the additional requests are automatically loaded into your app. If you turn off the app, how are you going to navigate to the location? I suppose you can use WAZE or Google Maps, but that’s likely to draw a lot of attention and you’ll soon get a message from Uber or Lyft. That’s like adding another 15 lbs. when you’re already climbing an impossible hill.

Obviously, there isn’t much over site internationally with Uber’s greed and stupidity. The best legal action for drivers is to get Uber and Lyft registered as a transportation company and NOT a technology company. Then with transport regulations there would be a cap on a number of cars that could be put on the road.

John, what I’d like you to look into is upfront pricing by Uber. I have already read their justifications for it, but since they are letting us see the actual payouts between the driver, pax and Uber (fare details) I have to say what I see adds up to drivers really getting screwed.

eric

I think the way to solve the surge pricing is that we should have certain time slot must be signed up by drivers to ensure constant service and preventing too much surge that push rider too hard. By keeping certain required time slot of about 2 hrs each and must be fulfilled then the rest is available as free agents then that would prevent over surging. Also there must be a way to limit long distance pick up that is too hard on drivers. Like all pick up must be within 3 miles then it is fair and keep wait time down. Other than that it is all good.

random browser

I drive in San Francisco. Here, they offer boost zones where the rate is higher during certain hours. Up to 2x normal rates at rush hours. I keeps the surge down, but plenty of other drivers have no boost offers. It does seem that drivers with boost offers get less ride requests. On pools in the boost zones, immediately after accepting the first passenger, I turn off my GPS. This avoids getting another passenger in the pool because they don’t know where I’m at. I take the passenger and return to boost zone, and do it again. I can usually complete 3-4 trips per hour doing this, compared to 1 pool trip with multiple riders. This is a situation Uber created with it’s low rate scheme. Flat rate? No problem. How ’bout a free trip across the bridge and back? Uber pays the toll in both directions. I get paid toll twice, pay it once and also get an extra 5 miles and 10 minutes while the tourists are thrilled to look out the window over the Golden Gate Bridge. There’s more, a lot more. I’m not the only one doing this.

JackM

Lyft Drivers, OPT OUT!:

A new agreement for some was recently pushed down with changes particularly for Power Drivers. Read the agreement, especially part 17. Or don’t read the agreement but go to part 17. This is your chance to opt out of binding arbitration. OPT OUT! Lyft is flagrantly violating various state labor laws, and Federal EEOC. Opt out if you want to be included in any actions that may be filed on a “class” level by your respective state’s Attorney General.

W. Curtis Preston

Isn’t the only way to opt out to not drive for Lyft any more?

JackM

New agreement, new opportunity. This doesn’t just apply to drivers but passengers as well.

W. Curtis Preston

Isn’t the only way to opt out to not drive for Lyft any more?

boxdin

I read in wsj uber saved 15% from cost of new cars by going w these rejects. I don’t think the vehicles safety history was a factor in their decision.

FP

I think this article is just highlighting how the difference in accounting will affect Uber’s overall revenue number. It’s the one thing they had. They aren’t making money, they are squeezing drivers for every dime they possibly can, and still not profitable. But one thing they could boast about was hyperbolic growth and insane revenues. Which I guess is what the tech industry values the most? But with the new accounting(which is still a long way off), they will have their revenue numbers sliced by a fair amount.

I couldn’t really imagine being able to coordinate well enough with a large enough number of drivers to influence surge pricing. But the other part, about going offline after accepting the first pool pax, I think a LOOOOT of people do that. I do it. I have even had pax who tell me a lot of their drivers are doing it as well.

VHound

Meg Whitman would be a terrible choice for Uber CEO. The new accounting rules aside, Uber needs someone NOT entrenched in silicon valley – 1st Ebay and now Hewlett-Packer. I personally think the Kalanick part of the board said no way. They do not want a female General Patton.

Uber investors are the ones who are freaking out over the accounting changes. The desire for an IPO materializing soon is fading fast. The truth is, the board should not hire someone to take Uber public. It needs someone who can run a goddamn business. Someone who understands what and how a service company works and what changes need to be made to it successful. The current ‘race-to-the-bottom’ pricing model is simply insane. If they choose the wrong leader Uber may end up being the AOL of Ride Sharing.

As far as the second piece, I agree with you 100%. I tried organizing Uber drivers for about three months and gave up. It’s virtually impossible. There is no data base of drivers with contact info accessible. None that I could find anyway. And organizing enough drivers to log off simultaneously is basically impossible. As you mentioned, the current surge levels are not even a third of what they were 6 months ago. And I believe the reason for that is that Uber and Lyft have succeeded in bringing in so many new drivers (called ants) with their false promises that the balance of supply and demand has been destroyed. In LA, if you drive 7-9 am in the 1.5x 1.6 boost areas, you’re lucky to get more than two trips an hour.

The Uber pool and Lyft line actions mentioned also seem a tad wrong. On Uber, once you accept a pool ride the additional requests are automatically loaded into your app. If you turn off the app, how are you going to navigate to the location? I suppose you can use WAZE or Google Maps, but that’s likely to draw a lot of attention and you’ll soon get a message from Uber or Lyft. That’s like adding another 15 lbs. when you’re already climbing an impossible hill.

Obviously, there isn’t much over site internationally with Uber’s greed and stupidity. The best legal action for drivers is to get Uber and Lyft registered as a transportation company and NOT a technology company. Then with transpo regulations there would be a cap on a number of cars that could be put on the road.

John, what I’d like you to look into is upfront pricing by Uber. I have already read their justifications for it, but since they are letting us see the actual payouts between the driver, pax and Uber (fare details) I have to say what I see adds up to drivers really getting screwed.

TheBindApp

New CEO race: It comes down to make sure an experience persons hops on the throne. Repeating mistakes is not affordable for the company. By this time, with the valuation is has, due paying time is over. It needs to be in the best interest of the business to deal better with drivers. Users already recognize the company as one of the leads in the market. Time to balance the efficiency for its ‘workers’ as well.

Surcharge situation: If drivers felt better rewarded (not feeling slashed out in commission payments while the company grows fat in revenues due to lack of regulation), probably less sneaky moves would be pulled off by them to trick the system. It also comes down to better coding on their part to avoid ‘algorithm gaps’.

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I'm Harry, the owner and founder of The Rideshare Guy Blog and Podcast. I used to be a full-time engineer but now I'm a rideshare blogger! I write about my experience driving for Uber, Lyft, and other services and my goal is to help drivers earn more money by working smarter, not harder. Read More…

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